Friday 17 August 2018

Adrian Weckler: What, who, when: the next steps in Ireland's rural broadband saga

It’s been a dramatic week for the National Broadband Plan

Stakes are high for the 540,000 rural homes waiting to be connected after SSE withdrew from the plan to roll out the network
Stakes are high for the 540,000 rural homes waiting to be connected after SSE withdrew from the plan to roll out the network
Communications minister Denis Naughten
Enet boss David McCourt
Adrian Weckler

Adrian Weckler

SSE, the major utilities and energy company that was set to build out the rural fibre network to 540,000 homes and businesses, quit the process at the last minute.

It leaves Enet with a huge gap in how it is to deliver the project. So what’s going to happen next? Here’s a 10-point guide on the main issues and players.

1 What is the National Broadband Plan?

The National Broadband Plan (NBP) is the Government's taxpayer-funded scheme to connect a quarter of Ireland's homes and businesses (540,000) to top-level fibre broadband. Most of these premises are in rural areas, where conventional broadband firms won't invest in infrastructure due to sparsely laid-out properties that would be unprofitable.

The criteria for a house or business to be included in the NBP catchment area is the lack of any existing broadband service capable of delivering a minimum of 30Mbs. Because most of the planned new NBP service will be fibre, this will give the fastest speeds in the country. But laying all that fibre (right up to your home or company) is a laborious, expensive business that is expected to take at least three years and cost well over €1bn.

2 Who are the main players?

There are three main players.

(i) Enet, a relatively small Irish company that has run a number of fibre networks on behalf of the State for some 20 years. Its boss is the wealthy American businessman David McCourt, who also part-owns Enet's minority shareholder, Granahan McCourt. McCourt has a number of other business interests, including TV production. His main business partner is Walter Scott, an American tycoon who sits on the board of Warren Buffett's Berkshire Hathaway company.

Against formidable odds, Enet is the presumptive winner of the State's upcoming National Broadband Plan tender because it is the only company left in the bidding process: it saw off giants such as Vodafone and the ESB (through their joint venture, Siro) and Eir (which withdrew earlier this year).

Enet got this far partially because it assembled a consortium of credible companies to design, build and run a national fibre network. This included the UK infrastructure giant SSE, which was to physically build the network. In the last week, however, SSE has confirmed that it has withdrawn from Enet's consortium and has exited any NBP involvement.

(ii) Minister Denis Naughten and 15 Department of Communications officials

Formerly a staunch critic of State inactivity on rolling out rural broadband, the Independent TD for Roscommon now heads up the Government's efforts to procure a public-private partner in building and maintaining a state-wide rural fibre network for 25 years. Key officials leading the process in the Department include programme director Fergal Mulligan, assistant secretary Ciarán Ó hÓbáin, chief technology officer Patrick Neary and principal officer Orla Ryan. Eleven other officials are also attached to the process. There is also a wide array of external advisers to the Department, including Analysys Mason, PWC, Deloitte, KPMG, Mason Hayes and Curran and others.

One significant departure from the programme was former Communications Department assistant secretary Katherine Licken, who left to become secretary general of the Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs.

(iii) Eir. Even though it dropped out as a main bidder for the National Broadband Plan contract earlier this year, Eir remains a critical actor in the NBP's fate.

It still owns most of the country's telecoms infrastructure. This means that any plan to build a new rural network will inevitably intersect or cross Eir's infrastructure at regular points. This has led to tension between all three parties, with both Enet and government officials warning that Eir needs to be co-operative for the scheme to work. For its part, Eir has insisted that it cannot be asked to subsidise a new network out of its own pocket, either through below-market access rates or undue extra maintenance.

Eir may yet have a larger role in the process if Enet cannot find a suitable replacement for SSE, as the former Telecom Eireann remains one of the few telecoms companies within reach that has the capability of doing what SSE was supposed to.

3 The SSE departure

While specifics aren't being put on the record, SSE appeared to have acquired cold feet in recent months. From an initial position of optimism, it became unhappy with its overall prospects in the National Broadband Plan process. The exact trigger hasn't yet been revealed by SSE Ireland boss Stephen Wheeler, who was initially an enthusiastic advocate for the plan.

"It's a natural next step," Wheeler told me late last year. "I don't think that anyone can dispute that broadband in the future is an essential service. The next step for us is networks."

But not with Enet and the NBP, it seems. SSE is a large FTSE 100 company with annual revenues of almost €40bn. It may have come around to the idea that the NBP had too many unforeseen downsides, from the perspective of time management and regulatory issues, compared to the potential upsides.

4 Does Enet need to replace SSE?

Yes. Enet manages networks once they are built but does not build the networks itself.

UK infrastructure investment firm John Laing is part of the consortium, but is not a direct builder.

5 Who will replace SSE?

Eir? The ESB? Some specialist firm from the UK or France? Ironically, in Ireland the most qualified company to replace SSE is Eir. It has the most experience, especially given its own current fibre buildout to 330,000 rural Irish homes and businesses (which are separate to the 540,000 premises still waiting for the NBP). As of the time of writing, Enet had not approached Eir as a replacement to SSE, even though Eir and Enet are in continual discussions about other elements of the NBP, especially issues around poles and ducts.

6 What about the State's exposure to Enet's success or failure?

This is a background issue worth keeping in mind - 78pc of Enet is owned by the Irish Infrastructure Fund (IIF), a private fund which is backed by the State's Ireland Strategic Investment Fund (ISIF) to the tune of €250m. That €250m is state money. So Ireland's treasury has an added iron in the fire when it comes to Enet's success or failure.

7 Is the NBP cost likely to go up?

Yes. Current industry estimates put the cost to the taxpayer at up to €1bn. But the Government's negotiation power has diminished substantially. If it wants to proceed with this process, it may now have to agree to whatever revised costing it placed before it by Enet. Enet's own costs may go up, given its frantic search for an SSE replacement at a late stage. Those costs will likely be passed on to the taxpayer.

8 So could it be delayed again?

That's quite possible. Even though the Government needs this plan to become a reality soon, it can't simply give a blank cheque to an incomplete bid. So Enet may now require more time to replace what was a critical partner in SSE. That would mean no deal in 2018 and no connected homes before the end of next year or 2020.

9 Why is there such a fuss over rural broadband?

Because without it, life is much harder in 2018 - both at home and especially at work. Ironically, EU surveys over the last three years consistently show that when Irish small firms get access to good broadband, they crush European competitors on cross-border selling and ecommerce. It turns out that we're rather good at doing business online when we get the chance. But with a quarter of the country's premises in dead internet areas, that potential may be wasted. One recent survey (from Amárach) claimed that one in four rural dwellers have considered leaving their local areas for a bigger town because of lack of internet access.

10 What happens now? Is the NBP scuppered?

Despite the significant problems, it seems politically unimaginable that the National Broadband Plan would be scrapped outright. With 540,000 rural homes in the mix, the stakes are simply too high. A return to the drawing board could set rural broadband access back several years, which would be a disaster for up to 1.5 million people. So despite all the difficulties, it still seems more likely that some form of subsidised rural broadband scheme will be pursued.

It's been a dramatic week for the National Broadband Plan, writes Adrian Weckler. SSE, the major utilities and energy company that was set to build out the rural fibre network to 540,000 homes and businesses, quit the process at the last minute. It leaves Enet with a huge gap in how it is to deliver the project. So what's going to happen next? Here's a 10-point guide on the main issues and players.

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